IATA's Latest Figures Reflect a Robust Airline Recovery

Latin American carriers posted the fastest growth in demand during May.

Traffic among the world's airlines returned to pre-recession levels in May, following a brief interruption a month earlier of an otherwise steady recovery during the year, according to statistics released by the International Air Transport Association (IATA). The group announced that statistics on scheduled traffic for May showed an 11.7-percent increase in passenger traffic and a 34.3-percent jump in freight demand compared with the same month a year earlier.

“Demand rebounded strongly in May following the impact of the European volcanic ash fiasco in April,” said IATA director general and CEO Giovanni Bisignani. “Passenger traffic is now 1 percent above pre-recession levels, while the freight market is 6 percent bigger.”

A capacity increase of 4.8 percent during the month lagged behind the strong upturn in passenger demand, driving May's international passenger load factor to 76 percent (78.7 percent when adjusted for seasonality). The figures mark the sixth consecutive month with seasonally adjusted load factors near 79 percent. However, said IATA, matching capacity with demand will become increasingly challenging in the coming months. Aircraft utilization remains 5 percent below pre-recession levels for single-aisle aircraft and 8 percent lower for longer-range twin-aisle aircraft. The 100 aircraft taken out of storage during May and the 93 new aircraft delivered globally add further capacity pressure, it said.

Similarly, the strong surge in cargo traffic outstripped a capacity increase of 12.3 percent, pushing load factors to a record high of 55.7 percent (56.3 percent when adjusted for seasonality).

Latin American carriers recorded the fastest growth in demand, at 23.6 percent in May, supported by the region's strong economic upturn. Once again, Middle Eastern carriers also turned in a strong showing, with a 17.5-percent increase during the month, although the pace of growth in that region has dropped from the more than 20-percent increases recorded earlier in the year.

Meanwhile, Asia-Pacific carriers recorded a 13.2-percent rise in demand as that region continued its robust economic growth, primarily in China, while North American carriers saw a 10.9-percent increase in May over the same month last year. Careful matching of capacity to demand has driven the North American load factor to 82.4 percent, the highest among all regions.

Finally, the region with the weakest growth–Europe–still recorded an 8.3 percent traffic increase following the damage wreaked by the volcanic eruption in Iceland in April. Weak economic growth, questions over financial stability and sharply tightening fiscal policies will likely result in continued slower traffic gains than in other parts of the world, said IATA.

IATA now expects airlines to post a $2.5 billion profit in 2010 in a dramatic turnaround from the $9.9 billion they lost in 2009. “This is good news, but it is only a 0.5-percent margin,” said Bisignani. “We are still a long way from sustainable profitability.”

In the short term, said Bisignani, airlines need to focus their efforts on continuing to carefully match capacity with improving demand conditions and, of course, control costs. “This includes airports, air navigation service providers, global distribution systems and labor,” said Bisignani. “There are no exceptions.”

“Two months ago, the Icelandic volcano made it clear that aviation is vital to the global economy,” he added. “When the volcano went to sleep, politicians developed amnesia to the lessons learned. Germany proposed a €1 billion departure tax that will dampen demand instead of stimulating growth. The new UK government is talking about a future without domestic aviation and no capacity growth, without any analysis of the devastation that this would bring to the UK's economy. And the much anticipated accelerated progress on the €5 billion savings of the Single European Sky has been truncated at incremental change. The traveling public and Europe's struggling economy deserves much better than this short-sighted policy myopia.”